A Recent 2017 survey of 1600 third party retailers on Amazon found that sellers where most concerned about losing their seller privileges. 52 percent of participants found this a major concern followed by 50 percent who were most concerned about high seller fees and 45 percent who identified the fact that the online giant could compete with them as most concerning.

In looking at whether third party sellers on Amazon should take advantage of Amazon's success or work harder at diversifying, below are some thoughts from industry leaders on this issue ......

“The great thing about Amazon Marketplace is that it offers an incredible “turn key” solution for integrated marketing, selling and distribution. Very few if any third-party sellers could come close to matching Amazon’s service levels.

The danger is that the “turn key” belongs to Amazon, not the marketplace seller. The third parties’ fears of changes in pricing and Amazon’s own aggressive expansion of marketplace categories are very real. Diversification is one answer, but it is not easy or inexpensive.

The most important thing that third-party sellers can do is to establish a relationship with their customers who purchased a product. A modern, efficient CRM is one of the best investments any seller or retailer can make. It’s a whole lot easier and more efficient to sell to a satisfied existing customer than to acquire a new one.”

“As an expert Amazon seller, I can tell you that brands need to do two things to survive. First, figure out how to use Amazon to build your brand and awareness. Make sure you are using all other marketplaces as well as your own e-commerce website in addition to Amazon to sell to consumers.

Second, sell brands you can control or that are exclusive. Online arbitragers who are competing for the buy box with hundreds of other sellers for the same item are the most at risk.

Amazon can be a great tool to build your business. But you cannot rely on it 100 percent. That is where the danger lies.”

“Third-party sellers must diversify. I know several who have seen their sales at Amazon drop dramatically as Amazon shifts policies without warning. To depend too much on Amazon remaining the same is a recipe for disaster.

For example, Amazon is now asking for advertising fees in order for these sellers to rank high in unbranded search results. We can figure those fees are essentially slotting allowances with a different name.

Amazon is, after all, another digital culture. Like Facebook, Google and LinkedIn, that means it feels free to pivot policies without warning — and only the very largest sellers can gain the traction needed to stay on top of what’s happening.”

“As with most things in life, extremes tend to lead to bad things. Leveraging Amazon to have an opportunity to compete is essential but make certain to diversify and augment Amazon with other marketing and merchandising channels and/or vehicles that make sense for the brand and business. Ask any agency or business that is forced to rely on a single client — it always leads to difficult times.”

“While using the Amazon Marketplace as a sales outlet for your business is a great source of revenue and Amazon (especially FBA) makes it truly easy, this can’t be the only source of sales. The risk is too high if you are completely dependent on Amazon for your business. Should businesses be worried that Amazon could change the playing field any time? Sure, but a smart business will also leverage other outlets such as their own websites, eBay or potentially other retail marketplaces to balance their revenue streams.”

No business wants to be 100% reliant on things out of their control so yes, 3rd party sellers should diversify and at the least get their products on all of the other main marketplaces with a focus on Alibaba, as well as build their own brands and websites if applicable.

However, I don’t see Amazon changing course radically on this any time soon as they are pretty much quadruple dipping on high margin profits through these sales.

Amazon gets:

·Fee from each sale

·Advertising dollars from most successful sellers and this area is only going to grow and be more competitive with more vendors entering this space. They have not even started to tinker with new ad units and placements.

·Fulfilment for the large majority

·If the retailer has their own site, pretty sure they are using AWS

The one curve ball will be how Alexa presents marketplace sellers over time. As voice grows, people are not going to want to hear Alexa rattle off dozens of other sellers for a product. She will most likely recommend either the Amazon version or the cheapest which means the sellers who have figured out real time price manipulation of their products will succeed.

As a test, if you have Alexa, ask her to shop for batteries. When I did, the only seller is Amazon and the only brand was Amazon Basics. No copper top or Energizer bunny, and only one retailer.

While many Amazon merchants sell exclusively on the platform, this year’s shift in expansion plans illustrates the evolving state of online marketplaces, and indicates that sellers are looking to new avenues for business growth.”